TURKEY has hit a fresh financial crisis which could cause a chaos across the eurozone after the lira plummeted to a record low.

One US dollar bought 5.57 lira during evening trading yesterday with the troubled currency plummeting five percent in one day.

Investors questioned the ability of newly elected President Recep Tayyip Erdogan’s to prevent the nation’s deepening financial turmoil spiralling further out of control.

The slump of the lira, which has lost a dangerous 30 percent of its value since the start of 2018, has triggered the presentation of a new economic plan by the country’s finance minister and son-in-law of President Erdogan, Berat Albayrak.

Though the nation has failed to address issues behind the currency’s fall in the past with president Erdogan refusing austerity measures, resulting in volatility seeping out of the nation and into the wider economy.

The slump comes after threats by the country to retaliate after US President Donald Trump slapped sanctions on Turkey for continuing to trade with Iran and for the detention of American pastor Andrew Brunson, who has been held on terror charges.

The European Central Bank warned sanctions constituted a “serious risk to the outlook for global trade and activity” and has shared concerned over the impact of the weak lira on European banks.

The euro also fell 0.5 percent to trade at $1.14 in the early hours of this morning.

This followed a report that Spain's BBVA, Italy's UniCredit, and France's BNP Paribas banks could be particularly impacted by the ongoing depreciation of the lira.

Turkey and Russia has seen their currencies slump today (Image: GETTY)

Director-general of the World Trade Organisation Roberto Azevedo warned global trade was “under treat” and that the outlook was “extremely serious”.

He added: “Whether or not you call the current situation a trade war, certainly the first shots have been fired.”

The devaluation of the lira ha also seen an eye-watering €18million loss by Europe’s leading travel firm Tui, formerly Thomson.

With trade sanctions becoming the political weapon of choice, Russia followed Turkey’s lead last night after the rouble also dropped four percent against the US dollar.

The slump in the lira comes after Donald Trump's sanctions (Image: GETTY)

President Erdogan has previously declared himself an “enemy of interest rates” and moved to take exclusive control over appointments to the central bank after winning incensed constitutional powers when re-elected.

The Russian currency fell to 66.1 to the dollar, it’s lowest rate since 2016.

Russia too was under threat from US sanctions due to breaching an international chemical weapons ban.

The Kremlin also promised to retaliate.

President Erdogan has refused austerity measures (Image: GETTY)

The lira’s decline prompted Salman Amed, chief investment strategist at the fund manager Lombard Odier to warn: “We think Turkey may need to approach the International Monetary Fund or seek other external support.

“Otherwise, capital-control measures seem to be a distinct possibility.”

The drop caused European stock markets to fall as investors shifted out of risky assets and into safe havens such as the US dollar and the Japanese yen.

The British pound also continued to slide following fears of a no-deal Brexit and was down to a one-year low. Sterling was down 0.23 percent at $1.28 after losing more than 10 percent since April.